All Forum Posts by: Miko Lee

Hi all,

New landlord here. I tried educating myself with a bunch of online resources and books before closing on a property, and yet, I still stumble when I am actually facing these situations. I received two applications for the unit the I am showing. The first applicants initially put one pet and one service animal in their application. Now, they just informed me that they are in the process of converting another pet to service animal. They are also asking us if we can beautify the yard by putting in real grass or artificial grass. We haven't even approved their application yet!? Otherwise, they clear the income, background, and credit check.

Now, I received another application out of no where today. They are much more qualified in terms of income and credit. They applied as father/daughter. It doesn't seem like the father will stay at the property, and he is only applying along with his daughter so that their monthly household income will be at least 3x the monthly rental rate. The income from daughter alone does not meet the income qualification. I thought in the lease, there should be a clause saying that all applicants should stay on the property? I am using Cozy. So, I couldn't really tell if the father is submitting as a co-signer or as a main resident. I will call to verify.

What do I do?? Initially i thought i will only be dealing with one application. I understand that we need to send out adverse action notice if we were to deny any applicant. Do you guys utilize the first come first serve basis if both applicants meet all qualifications standards? Or do you guys go with whoever that has the highest income, better credit score, etc.? 

Thanks!

@John Vartanian This is really really helpful. Thank you!

@Shaun C. Your suggestions are really helpful! The reason why I I have not drafted a new lease is because I have two other units vacant and needed to be filled. I am hoping to fill all the other units before drafting a new lease with the existing tenants. I don't want to make them upset about raising the rent (they are paying way below market), and also, asking them to clear out garage at the same time. The previous property manager was very lenient with the existing tenants. There are hidden pets, junks all over common yard, and installed satellite dish on the roof which are all prohibited based on their existing lease. The existing tenants may have verbal agreement with the previous manager. You are right. The next step is to draft a new lease. Question, If I were to draft a new lease, I am still bound by the regulation of that I need to provide 30 day notice to raise the rent by less than 10% and 60 day for more than 10%, correct? Does additional pet rent and garage monthly charge count toward part of the rent increase %?

@Deanna McCormick Even though it is a two cars garage, tenants can only park on the right side of the garage (driveway is too narrow). Thank you for the suggestion on charging 100 deposit on garage door. I didn't think of that!

@Shaun C. 

Thank you for the suggestions! Both of you mentioned a new lease. The inherited tenants are now on month-to-month and I have no plans on drafting a new 12 month lease. Will this be an issue? How do I offer the existing tenant an option to pay for garage, without a new lease? A change in terms of lease addendum? Do I even need this for a month-to-month? Should I offer both existing and new tenants of the parking option the same time (send notice at same time perhaps and utilize first come first serve basis) or should I offer the existing tenants first?

Hi all,

I recently bought my first small multifamily (two buildings - duplex and a single family). I only inherited tenants from one unit. Two other units are currently vacant. So, we have three units, but only one garage with an extra long driveway. Whoever gets the garage also get the driveway. The previous property manager told me that the garage is shared by the two units from the duplex. Each unit gets half of the garage. However, when I review the lease of the inherited tenants (now month to month, lease expired last month), no where in the lease saying that the inherited tenants get the garage space. I just found potential tenants for another unit. They seem to be really interested at the garage and willing to pay for it. I have yet to sign a lease with the potential tenants, but will in a week. How should I go about fixing the garage situation? I am thinking about sending a 30 day notice to the inherited tenants and tell them to either pay or vacate the garage. Also, when I sign the lease with the future tenants, I will also let them know about the garage option (same fee). It will be first come first serve. Do you think this is the right approach? Thanks!

Hello all, I recently closed a small multi-family deal. I have some tax questions. Supposedly there are 3 of us (Investor A, B, and myself), all three investors are on the title. But, the loan only has me and investor A. All three of us contributed to the capital and will split income/expense by partnership interest. We did not actually form a LLC because we want to take advantage of the conventional loan. My partners are my family. What are the tax consequences? Say if we have $1000 positive cash flow, and I have 10% interest, do I just file 10% of the $1000 as income, and deduct 10% of every single expense when it comes to filing my own tax?

Thank you @Andy D. @Jim Costa @Christian Clark @Arjav Parikh for the inputs. Decided to skip the deal. Mainly it's because I have a day job and it would be hard for me to manage a fourplex on a not so great area. Also, it would cost me a lot if I have to evict the tenants.

How do you go about estimating the property tax? Is this the same as single family? In orange country, the average tax is roughly 1% of the appraised value. 

Also, in terms of financing, if I qualify for both conventional 25% down and FHA owner occupied 3.5% down, which one should I go with? Conventional loan gives a higher cash flow, but low cash on cash and total ROI. FHA gives a lower cash flow due to owner-occupied, but higher cash on cash and ROI. Cap rate at around 6% which seems low, but appears to be standard in orange county. Thoughts?

Thank you all for the inputs! The agent that I found through Craigslist. He said it's typical to make an offer first, then review all the documents related to the multifamily during escrow. Is this true? I am slightly uncomfortable of making an offer when I don't know how bad is the condition inside the multi. It's a fairly small multi-family with an average of 500-600 square feet per unit. Owner lived in one of the units there for 30 years, earned enough equities and looking to sell. Rent 50% lower than market. How do you go about getting over with the fact that the multifamily has been in market more than a month? If it's such a good deal, wouldn't all investors jump right into the deal already? I felt like I am overlooking something here. Agent requires 3% to open escrow. It is then i can see the inside and review all documents.

Thank you Andy D. This is really helpful. It's been tough finding a single unit that is actually cash flow in SoCal. So I figure the best bet is multifamily.. thank you again!